51 A. 844 | Md. | 1902
This record contains cross-appeals. Each appeal presents one question. Both questions grow out of the same facts and but one opinion will be needed to dispose of the whole controversy. *21 The facts are not disputed in any way. They are as follows: By the seventh clause of the will of the late William E. Hooper, who died in eighteen hundred and eighty-five, there was bequeathed to his four sons and the survivors and survivor of them, the sum of ten thousand dollars "upon trust to invest the same and pay to (his) daughter, Mary Elizabeth Smith, during her lifetime, for her sole and separate use, the dividends and income thereof as the same shall accrue, without power to her to anticipate the payment of such income and dividends, or to charge or encumber the trust estate," with remainder over after the death of the daughter, to her children and the descendants of any deceased child, with a power of appointment by the daughter if no child or descendants of a deceased child survived her, and in the event of there being no child or descendant of a deceased child surviving the daughter and upon failure to make an appointment there is an absolute bequest of "this portion of" the testator's estate to all his grandchildren then living and the surviving issue of any deceased grandchild. The fund was paid over to the trustees. By the nineteenth clause of the will the trustees were empowered "to invest the moneys that shall come into their or his hands * * * in such property, real or personal, stocks, bonds or securities, as in their or his judgment may be advisable, and all such investments from time to time to change or vary in their or his discretion; as also to sell any property other than money coming to hand as parcel of the trust estate and the proceeds reinvest in their or his discretion, c."
R. Tynes Smith, the husband of the cestui que trust was engaged in the manufacture of cans. Associated with him was William A. Weeks, and the firm name was Smith and Weeks. In the latter part of the year eighteen hundred and eighty-seven the property, buildings, letters-patent, machinery and tools of the firm were sold at public auction, and, by the request of thecestui que trust, were purchased by the trustees who paid therefor the sum of seven thousand, seven hundred and forty-four dollars and ninety-three cents, out of the *22 ten thousand dollar trust fund held by them under the seventh clause of the will. After paying for the property so purchased, the trustees still had in hand the sum of two thousand, two hundred and fifty-five dollars and seven cents, the residue of the ten thousand dollar trust fund. The trustees then transferred the property thus purchased by them, to a corporation formed under the general corporation laws of this State, which company was known as the R. Tynes Smith Can Company. In payment for the property so transferred, the trustees received from the company three hundred shares of its capital stock at its par value of one hundred dollars per share. Subsequently the trustees sold fifty shares of this stock for five thousand dollars. The five thousand dollars added to the two thousand, two hundred and fifty-five dollars and seven cents, part of the original ten thousand dollar trust fund, gave them seven thousand, two hundred and fifty-five dollars and seven cents in cash, in addition to the remaining two hundred and fifty shares of the capital stock of the R. Tynes Smith Can Company, still retained by them. At or about that time, as the seventh paragraph of the bill of complaint charges, thecestui que trust, Mary Elizabeth Smith, "paid over and delivered to" the trustees "the sum of two thousand, seven hundred and forty-four dollars and ninety-three cents, in cash for no other reason or purpose * * * * than that they might still have in their possession and hold intact, without any abatement whatever, cash amounting to ten thousand dollars. In other words, that the cash in their hands might be restored to the original sum of ten thousand dollars, being the sum bequeathed to them in trust under the said seventh clause of the last will and testament of William E. Hooper, deceased." This sum of two thousand, seven hundred and forty-four dollars and ninety-three cents has relation to the question raised on the second appeal, but is alluded to now merely to preserve the continuity of the narrative. In 1889 Mr. Smith organized another corporation for the manufacture of cans. It was located at Keokuk, in the State of Iowa, and was called the Tri-State Can Company. The trustees *23 subscribed for ten thousand dollars of the capital stock of this company. They received three hundred and fifty shares and paid for them with the $2,255.07 of the original ten thousand dollar trust fund, in their hands as heretofore stated; the $5,000.00 received by them from the sale of the fifty shares of the R. Tynes Smith Can Company's stock; and the $2,744.93 turned over to them by Mrs. Smith as just above indicated. At that time the trustees held two hundred and fifty shares of the stock of the R. Tynes Smith Can Company and three hundred and sixty shares of the stock of the Tri-State Can Company. Up to February, 1901, they had collected in dividends on the two hundred and fifty shares, the sum of $27,500.00, and in interest on the ten thousand dollars or portions of it before its investment, the sum of $2,270.07, all of which had been paid over to the cestui quetrust. In May, 1901, The American Can Company, a New Jersey corporation with a capital of eighty-eight millions of dollars, was formed. Its whole capital stock was divided into an equal number of common and preferred shares of the par value of one hundred dollars each. That corporation was organized for the purpose of acquiring the business of all other companies engaged in the manufacture of cans. It accordingly purchased the assets of both the R. Tynes Smith Can Company and the Tri-State Can Company. As a result of this absorption the trustees received in lieu of the two hundred and fifty shares of the R. Tynes Smith Can Company, then owned by them, nine hundred and sixty-two shares of the preferred and nine hundred and sixty-two shares of the common stock of the American Can Company; 62 shares of the stock of another concern, and thirty-seven thousand, five hundred dollars in cash. They afterwards sold the nine hundred and sixty-two shares of common stock for twenty-five thousand, one hundred and fifty dollars and ninety-five cents. The final result of their investment of the $7,744.93 in the purchase of the property of Smith and Weeks is, that they now have in place of that sum, through the medium of the exchanges and sales alluded to, the $37,500.00 cash received *24 from the American Can Company, the $25,150.95 just mentioned, as the proceeds of the sale of the 962 shares of common stock — these items of cash aggregating $62,650.95 — and the 962 shares of the preferred stock of the American Can Company, together with 62 shares of the Johnson Company.
The trustees received from the American Can Company in exchange for the 360 shares of the Tri-State Can Company, held by them, 180 shares of the preferred and 180 shares of the common stock of the American Can Company, and $16,500.00 in cash. They sold the 180 shares of the common stock for $4,705.89, and still retain the preferred. The final result of their investment in the Tri-State Can Company is this: In place of the $2,255.07 part of the original trust fund, the $5,000.00 realized by the sale of fifty shares of the R. Tynes Smith Can Company's stock, and the $2,744.93 turned over to the trustees by Mrs. Smith, they now have the $16,500 cash received from the American Can Company, the $4,705.89 realized by the sale of the 180 shares of common stock — or an aggregate of $21,205.80 in cash — and 180 shares of preferred stock.
The total result of the investment and reinvestment of the original trust fund augmented by the $2,744.93 contributed by Mrs. Smith is this: The trustees now hold 1,142 shares of the preferred stock of the American Can Company, worth when the bill was filed, sixty-five dollars a share, or $74,230.00; $83,856.31 in cash and 62 shares of the Johnson Company, of no present value; altogether aggregating $158,086.31, apart from the $29,770.07 of the dividends and interest heretofore paid to thecestui que trust.
Mrs. Smith, the cestui que trust insists that all of this enormous increase in the fund in excess of the original ten thousand dollars, belongs to her and should be paid to her as income from the fund, and should not be held by the trustees as part of the corpus of the trust estate. The trustees deny this. She also claims, alternatively, that she is not only entitled to a return of the $2,744.93 handed over by her to the *25 trustees, but to a ratable proportion of the gain made by the investment of that sum and the $7,755.07 in the 360 shares of the capital stock of the Tri-State Can Company. These are the questions which the record presents. The first is the one raised on the appeal of Mrs. Smith; the second is the one brought up on the appeal of the trustees. The Circuit Court decided the first adversely to her; and it decided the second in her favor.
If this increase of $148,086.31 over and above the ten thousand dollars originally received by the trustees is income ordividends within the meaning of the seventh clause of the will, then, Mrs. Smith, the cestui que trust for life, is entitled to that increase, and the trustees can claim no part or parcel of it as capital. If on the other hand, that increase, created in the way hereinbefore minutely pointed out, is not income from ordividends upon the original trust fund, in the sense in which the words income and dividends are used in the will, then the $148,086.31, less the amount involved in the second appeal, forms part of the corpus of the trust estate and belongs, not to thecestui que trust, but to the persons entitled in remainder. And this is so because by the express terms of the will the cestuique trust is entitled only to income and dividends, and not to any part of the capital. So, the precise question on the first appeal is: Does this increase, thus accumulated, constitute income or dividends within the meaning and intent of the will? It may not be out of place, before proceeding to solve that inquiry, to advert for a moment to several cases referred to in the argument. They are Quinn v. Safe Deposit and Trust Co.,
"The word `dividend,' if unqualified," said the Supreme Court of Errors of Connecticut, "signifies dividends payable in money. The word `income' has a broader meaning, but hardly broad enough to include things not separated in some way from the principal. It is not synonymous with `increase.' The value of stock may be increased by good management, prospects of business, and the like. But such increase is not income. It may also be increased by an accumulation of surplus; but so long as that surplus is retained by the corporation, either as surplus or increased stock, it can, in no proper sense be called `income.' It may become producing, but it is not income." Spooner v. Phillips,
That there has been a marvelous increase of the fund is manifest. Is that increase income? Increase and income are not synonymous terms. Until detached or separated from the shares whose value it enhances, increase forms part of that value, and, therefore, part of the shares; and if it be part of the shares themselves then, whilst it may be profit, it is in no sense income. And this has been distinctly adjudged by the Court of Appeal of England. In re Armitage, 3 Ch. 337, (1893.) In that case it appeared that a testator gave his estate upon trusts for conversion and investment. He bequeathed one-third of the residue to the trustees for the benefit of A. for life and after her death upon further and other trusts. Part of the residue consisted of £ 10 shares in a company with £ 8 per share paid up. Some years after the testator's *28 death the company was wound up and reconstituted, and the new company paid for the testator's shares £ 9 5s. 6 1/2d. each, being £ 1 5s. 6 1/2d. per share more than had been paid up. The question was: Did this £ 1 5s. 6 1/2d. per share constitute income to which the tenant for life was entitled, or was it capital? LINDLEY, L.J., said: "In this case I do not feel much difficulty. * * * * The question we have to determine is, who is entitled to the sum of £ 1 5s. 6 1/2d. per share upon 4,450 shares which belonged to the estate of the testator, those shares being shares in a company which was wound up and reconstituted? We must first look to the testator's will. * * * * The short effect of that will is this — one-third part of these shares is held by trustees upon trust to pay the income to the tenant for life and subject thereto in trust for the remainder-man. Now, is this £ 1 5s. 6 1/2d. income within the meaning of that trust? How does this £ 1 5s. 6 1/2d. per share arise? It arises in this way. The shares were £ 10 shares with £ 8 paid up upon them. The company was wound up and the assets of the company were distributed amongst the registered shareholders, and each registered shareholder got £ 9 5s. 6 1/2d. instead of £ 8 — that is to say, upon the distribution of the assets, there was an excess of £ 1 5s. 6 1/2d., whether profits or capital I will not at present say, over the £ 8 paid up in respect of each share. It arose apparently in this way: The assets of the company consisted among other things of about £ 20,000 standing to a reserved dividend fund, and of £ 17,000 standing in the books of the company and representing undivided profits in addition to the reserved dividend fund. Those undivided profits, of course, could have been divided as dividends if the company had so thought fit. The £ 20,000 was applicable to the equalization of dividends. The moment the company got into liquidation there was an end of all power of declaring dividends and of equalizing dividends, and the only thing that the liquidator had to do was to turn the assets into money, and divide the money among the shareholders in proportion to their shares. That is what he has done. *29
"Now, there has been a great discussion about the nature of this £ 1 5s. 6 1/2d. as to whether it is capital or income, and whether it is profit. I should say it is profit. When a person gets out of a concern more than he puts into it the difference is profit. If I put £ 100 into a concern and get out £ 105, I get £ 5 profit. In that sense of the word, this £ 1 5s. 6 1/2d. is profit, being the excess of the money produced by the sale of the investment over the amount of money invested. But is it income to which the tenant for life is entitled? That is a totally different matter, and I say that it clearly is not. What does a man mean when he leaves shares to a tenant for life? He means that that tenant for life shall have the income arising from the shares in the shape of dividends or bonuses declared during the lifetime of the tenant for life. He does not mean that the tenant for life shall receive profits in any other sense. He does not mean him to have such profits for example, as arise by a realization of shares; he never dreamed of such profits going to the tenant for life. What he means is, that the tenant for life shall have the income derived from the dividends or bonuses declared by the company; and when you ask me whether this £ 1 5s. 6 1/2d. is income payable to the tenant for life, it seems to me as plain as possible that it is not, although it is profit in the sense I have just explained. * * * * * * * It is true that this property has never been capitalized by the company, neither has it ever been declared as a dividend or bonus by the company; the company has not dealt with it in either one shape or another. But when you come to ask yourself whether it is to go to the tenant for life or to the remainder-man, there can be but one answer — it is to go to the remainder-man."
Precisely the same principle is applicable when the trust fund has been invested by the trustees in stock or shares of an incorporated company, and has not come to them already invested by the testator. If the value of such shares in which the trustees have invested the trust fund, consists in part of accumulated surplus or undivided earnings, the additional value is part of the capital and together with the par value *30
of the shares must be kept intact for the benefit of the remainder-man. Van Doren v. Olden,
The case of Heighe v. Littig,
Whilst from quite an early period it has been held in this State that the gift or bequest of a female slave to one for life with remainder over to another, vested in the life tenant an absolute property in the issue of such slave born during the continuance of the life estate, yet when it came to the question whether the life tenant was entitled to such issue where the slave and other property, real and personal, had been devised and bequeathed to trustees and the life tenant was given the income arising therefrom, with remainder over to others, the Chancellor held that the increase — the issue of the slave — belonged not to the life tenant as income, but was the property of those in remainder. Holmes v. Mitchell, 4 Md. Ch. Dec. 162. This decree was affirmed on appeal by a divided Court. Holmes v.Mitchell,
If, by the terms of Mr. Hooper's will, the life tenant had been given not only the dividends and income, but also the profits arising from an investment of the trust fund, a different question might and probably would have been presented. The case of In re Park's estate, 173 Pa. St. 190, 33 Atl. Rep. 884, illustrates this. In that case the main question was what things, under the facts, properly constituted "income and profits" and what "principal." The excess over and above the original trust fund, realized by the trustees on the sale of mortgaged premises previously bought in to protect the fund, was decreed to belong to the cestui que trust, because that *31 excess constituted "income and profits," and the cestui quetrust was entitled to both income and profits within "the purpose and intent" of the testator's will.
Inasmuch, then, as whatever of value there is in the shares of stock in which the original trust fund was invested and reinvested is, so far as the record discloses, inherent in the stock itself and has not been segregated from the stock in any way; it must be held to form part of the trust fund, and, therefore, to belong to the trustees and not to the cestui quetrust, except as hereinafter indicated. This is the result reached by the Circuit Court No. 2, and with that conclusion we concur.
Now, as to the second appeal. The $2,744.93 of cash turned over to the trustees by Mrs. Smith was her own property. It was invested by the trustees along with a portion of the trust funds in the stock of the Tri-State Can Company. The whole fund so invested grew in value. The cash and stock received by the trustees from the American Can Company in exchange for the 360 shares of the Tri-State Can Company represent the whole ten thousand dollars invested in the shares of the latter concern. As a part of that ten thousand dollars belonged to Mrs. Smith, so a part of the Tri-State Can Company's stock belong to her, and, of course, a part of the cash and a part of the common and preferred stock received in exchange from the American Can Company likewise belongs to her. She is accordingly entitled out of the $16,500.00 cash received from the American Can Company and out of the $4,705.89 realized by a sale of 180 shares of the common stock and out of the 180 shares of preferred stock still held, to such and the same proportion as the $2,744.93 contributed by her bears to the whole $10,000 invested in the stock of the Tri-State Can Company, less a due proportion of the costs and expenses of these proceedings. This is also the conclusion reached by the Circuit Court and as we concur in it, it will be affirmed.
Decree affirmed in all respects, the costs in this Court to bepaid out of the trust fund ratably.
(Decided April 2d 1902.) *32
A motion was subsequently made by the appellant, Mrs. Smith, to remand the cause to the Court below for an amendment of the pleadings and for further proceeding. In disposing of the motion
McSHERRY, C.J., delivered the opinion of the Court.
This cause was argued and decided during the last January Term. The questions involved in the controversy were presented by a bill in equity and by an answer thereto. The facts were not disputed. On the contrary, they were distinctly agreed to. Accepting as true the averments of the bill which were admitted by the answer — and all the material ones were admitted — we proceeded to decide and did decide the legal questions raised, discussed and submitted. After the judgment of this Court had been handed down a motion was filed, asking this Court to remand the cause for amendment of the pleadings and for further proceedings. That motion will now be considered.
In the petition accompanying the motion it is stated that the facts which should have been presented but were not, are wholly and radically different from those set forth in the bill and answer, and relied on in the decision heretofore made; and it is asserted that if the appellant be given an opportunity to submit the actual facts in place of those erroneously assumed in the pleadings to be true, the result would be precisely the reverse of the one heretofore announced. We are, therefore, asked to remand the case to the Court below, notwithstanding we have affirmed the decree appealed against, so that the pleadings may be amended in such a way as to present an entirely different and exactly opposite state of facts. In a word the request is, that instead of affirming the decree, the accuracy of which, on the facts disclosed as they now stand by the admission of the parties, is not at all disputed, we remand the record with instructions to allow the parties to so amend the pleadings as to make a totally different case from the one they originally presented. The ground upon which this request is placed is, that the case was "a non-contentious *33 one" — that is a case which did not involve a hostile contest as respects the facts, because the facts were conceded. It is insisted that inasmuch as facts were conceded which ought not to have been conceded because in reality they did not exist, the appellant should not be bound by the concession after the decision has been adverse to her, but that she should be allowed to withdraw that concession now and should be permitted to assert and rely on precisely opposite facts.
Have we the power to do this? Sec. 36, Art. 5 of the Code declares: "If it shall appear or be shown to the Court of Appeals that the substantial merits of a cause will not be determined by the reversing or affirming of any decree or order that may have been passed by a Court of equity, or that the purposes of justice will be advanced by permitting further proceedings in the cause, either through amendment of any of the pleadings or the introduction of further evidence, making additional parties, or otherwise, then the Court of Appeals, instead of passing a final decree or order, shall order the cause to be remanded to the Court from whose decision the appeal was taken, and thereupon such further proceedings shall there be had by amendment of the pleadings, or further testimony to be taken, or otherwise, as shall be necessary for determining the cause upon its merits, as if no appeal had been taken in the cause, c."
It must be borne in mind that this Court has no original jurisdiction. Its functions are purely appellate. If the statutes do not give jurisdiction to hear a case except upon the record as transmitted, then it is obvious that this Court has no power to inspect documents or to consider evidence with a view to determine whether facts stated in the record to be facts, are facts or simply fiction. To decide whether conceded facts are facts, is to determine, not what is the law applicable to the conceded facts, as was done by the Court below and by this Court, but to investigate a distinctly new question not raised by the record and not suggested in the Court below. We declined to do this very thing in Stanley v. Safe Deposit Co.,
Returning to the language of the statute it is apparent that the Code contemplates an entirely different situation from the one now being dealt with. Whenever it shall appear or be shown to the Court of Appeals (first), that the substantial merits of a cause will not be determined by affirming or reversing a decree, or (secondly), that the purposes of justice will be advanced by permitting further proceedings, then and in either of these events, the Court of Appeals "instead of passing a final decreeor order," shall remand the cause, c. Such a remanding if made must be made before final decree and because a final decree cannot be passed on the record as it stands without doing injustice. In addition to this, such a remanding is allowed only when it appears or is shown to the Court by the record in thecase either that the substantial merits of the case will not be determined by an affirmance or a reversal, *36
or, that the purposes of justice will be advanced by permitting further proceedings. In Genl. Ins. Co. v. U.S. Ins. Co.,
We do not perceive how the circumstances now relied on, even if proved, would change the conclusion heretofore reached, unless the authority of the case of In re Armitage, 3 Ch. (1893) 337, be repudiated. But we refrain from discussing a situation which is not before us, though we may add that a resolution adopted by the directors of the R. Tynes Smith Company subsequently to the decision of this cause and considerably more than a year after the company went out of existence, can have no influence on any of the questions considered and decided heretofore, or on any of those raised by the motion now under review.
It is unfortunate if the appellant misconceived the facts in the first instance, but the appellees deny that there was any such misconception. They assert that the facts alleged in *37 the bill and admitted by the answer are true. Thus a distinct issue is presented by the motion and the answer thereto, and it is an issue which this Court has no jurisdiction to decide.
For the reasons assigned the motion must be overruled.
Motion overruled.
(Decided June 19th, 1902.)